The Hindu Business Line : Cancun: A start for developing countries

THERE have been concerns that poor countries will suffer more in the aftermath of Cancun, as the ensuing international order is likely to see a spurt in bilateral and regional trade liberalisation with the WTO getting increasingly marginalised. These concerns may create panic among the developing countries. However, an analysis of the situation indicates that the fear is grossly exaggerated.

It has been a general concern that the failure of the Cancun Ministerial does not augur well for the multilateral trading system under the WTO. However, it may not necessarily be so, especially as the so-called success at the Ministerial would not have ensured the success of all its members.

Until the Doha Ministerial Conference, the WTO game was essentially between the US and the EU, and developing countries were fringe players.

At Doha, however, developing countries were assertive and even created a near-deadlock situation. The developed countries eventually gave up and agreed to a deal that they never wanted. The developed countries expected a repetition of Doha at Cancun and, hence, finally dished out a draft declaration that unabashedly ignored the interests and concerns of the developing countries. History repeated itself. But to the surprise of the developed countries, the repetition was not of Doha but that of Seattle.

Immediate worries

The Doha Agenda includes three types of issues. The first type aimed to address the existing anomalies or mitigate the "side effects" caused by the existing WTO agreements. These include TRIPs and public health, implementation issues, work programmes on such issues as S&DT and so on. The second included liberalisation or reforms in agriculture, services, non-agricultural products, WTO Rules (anti-dumping and subsidies), TRIPs (geographical indication) and dispute settlement and so on. The outcome of these could go either way. The third comprise the Singapore issues and environment, and essentially broaden the agenda of the WTO. These will put an unequal burden on the developing countries.

It is quite obvious that the promises the developing countries got from the rich countries were too little compared to the commitment (though conditional) that they had to make in return. Except the issue of TRIPs and public health, progress made in other areas has been insignificant. Hence, the immediate concern that the unsuccessful Ministerial at Cancun may slow down the Doha work programmemeans that the compromise reached on TRIPs and public health will take more time to be implemented.

Future concerns

The fear that the lack of adequate progress at the WTO will lead to more regional trade agreements (RTAs) as well as the signing of bilateral free trade agreements may not come true. Moreover, the signing of these agreements has been quite independent of the progress at the WTO. A successful Ministerial at Cancun would not have stopped such efforts. The US, for example, has recently signed free trade agreements with Jordan and Singapore. It is also negotiating such agreements with some other countries, including Australia. On the other hand, the US is now engaged in negotiations with 33 other countries of the Americas and the Caribbean to create the Free Trade Area of the Americas (FTAA), intended to be the most far-reaching trade agreement in history. A successful Ministerial at Cancun would not have meant that the US would have dropped all such initiatives.

The US and the EU may now become more aggressive in signing bilateral and regional agreements. However, movement along those lines will not be easy. It is quite difficult to imagine the emerging market economies or important developing countries such as India, Brazil, China, Malaysia and South Africa, signing bilateral free trade agreements with the developed countries.

The free trade agreement that the US has signed with Jordan is entirely shaped by it and, hence, includes measures for investment liberalisation and provisions on environment and labour standards. It also imposes more restrictive intellectual property rules on Jordan than those under the WTO. Most developing countries will find it politically difficult to accept such an agreement. Thus, they may have to be content with signing of such bilateral agreements that will not bring any substantial gains.

Regional agreements are, of course, a different ballgame. They are not just free trade agreements but generally go much beyond. This may be good for the participating countries as normally they share a common history, geography and even culture, and have much to gain from such cooperation.

They may not be necessarily bad for others as well. Admittedly, the net effect of a regional trade agreement depends on the relative importance of trade-diverting and trade-creating effects. However, a recent study involving seven South - South Rregional trade agreements has shown that with the exception of the Andean Community and MERCOSUR, the other South - South RTAs are not only trade-creating but also trade-expanding.

Moreover, it will not be easy to launch the FTAA. It contains provisions on competition policy, government procurement, market access and dispute settlement that, together with the inclusion of services and investment, can remove the ability of all the national governments to create or maintain local or national laws, standards and regulations to protect the health, safety and well-being of their citizens.

Many Latin American and Caribbean countries will find it difficult to convince their domestic constituencies about the "virtues" of the FTAA package after vehemently opposing the Singapore issues at Cancun. This has become amply clear at the recent meeting at Miami on the FTAA, from where the US Trade Representative, Mr Robert Zoellick had to return empty-handed.

Beyond Cancun

Given the situation in Cancun, developing countries had hardly anything to gain but a lot to lose from a "successful" Ministerial Conference there. A grossly unbalanced and unfair declaration pushed the developed countries to the wall without any space for manoeuvrability.

Developing countries have already given huge concessions in terms of TRIPs, TRIMs and GATS to get agriculture and textile and clothing into the GATT/WTO framework during the Uruguay Round of negotiations. Hence, linking investment with reduction in agriculture subsidies as a quid pro quo, as demanded by the EU, was quite outrageous and amounts to selling one good twice.

However, all is not lost. The Doha Development Agenda is still alive. The WTO members can still talk. The failure at Cancun holds lessons for both developed and developing countries in more ways than one.

For developed countries, the lesson is that they can no longer take the developing countries for granted. Developing countries need to realise that collectively they can make a difference.

Maintaining this unity will be even more important in the coming months. Developed countries will try to rope in some of them with unilateral concessions which they may even withdraw at an opportune time. Thus, for developing countries, Cancun was not an end but just a beginning.

(The author is a Policy Analyst with Consumer Unity and Trust Society (CUTS), Jaipur. The views are personal.)